Companies selling the technology that links retailers to their customers via email, online chat, and soon, voice, are consolidating at a rapid clip to better meet the growing customer service needs of Internet retailers.

E-retailers industrywide are realizing that to keep a customer is cheaper than to acquire a new one (See related story.) And as service has become more critical, retailers are demanding product suites that will help them interact with customers online via such self-help features as frequently asked questions (FAQs), email, real-time chat, and eventually voice.

Consolidation is the logical route for smaller, specialized firms seeking to provide one-stop shopping for customers, which are often start-ups seeking fewer service headaches.

The wave of consolidation began rippling through the industry in February, with the merger of BaliSoft, which sold self-service and
email products, and ServiceSoft, which marketed voice and data management software. The new company, called Servicesoft Technologies, became perhaps the first company to offer a suite.

That merger was quickly followed in May by email-management vendor eGain acquiring Web chat company Sitebridge, which offered technology for
Web collaboration, telephone callback, and IP-based voice.

"Consolidation is definitely the way the industry is headed," said Cormac
Foster, an analyst with Jupiter
Communications.

However, not everyone is going that route. Adding capabilities via acquisitions requires the challenge of integrating two different sets of technologies. Some companies such as customer service chat software maker Acuity and
FaceTime Communications have opted to build their own suites because of the challenge.

Yankee's Robins concurs but says the old-line vendors must worry about their existing customers.

"Many traditional client-server or call-center vendors have not acted as quickly as they might," he said. That may be because they lack the skills to build Web-based systems and fear the impact that integration issues may pose for customers, he said.